In this article, we will discuss the 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. If you want to skip our detailed analysis of Parsons’ history, investment philosophy, and hedge fund performance, go directly to the 5 Best Dividend Stocks to Buy According to James Parsons’ Junto Capital Management.
James Parsons is the Chief Executive Officer & Copartner at Junto Capital Management since 2013. Previously, Parsons was employed as an Asset Manager by Viking Global, which he left in 2012 after differences with Viking’s chief and billionaire Andreas Halvorsen.
James Parsons has more than 75% ownership interest in Junto Capital Management. Junto Capital Management is a New York-based hedge fund which utilizes a long/short equity plan, investing in technology, media, and telecommunications industry.
The firm’s 13F portfolio is valued at approximately $2.781 billion as of the end of the first quarter of 2021. In 2020 the hedge fund gained 50.63% returns compared to 18.25% return posted by SPDR S&P 500 ETF Trust (NYSE: SPY). While it gained about 11.07% in the first quarter of 2021 compared to 5.17% return posted by S&P 500.
Among the notable holdings of Parsons as of the first quarter of 2021 include Microsoft (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB).
Parsons’ hedge fund increased its hold in Microsoft (NASDAQ: MSFT) in the first quarter of 2021 by 16%, ending the period with 393,623 shares of the company, worth $93 million.
Amazon.com, Inc. (NASDAQ: AMZN), in which Parsons has a $52.25 million stake, is also gaining a lot of investor attention. On June 30, the company announced that it plans to have 10,000 of its EV transportation fleet on the road as early as 2022. On June 29, Amazon.com, Inc. (NASDAQ: AMZN) declared that it is scheduling to open its first Amazon robotics fulfillment center in Parkland County, Alberta, Canada, creating more than 1,000 full and half-time jobs to work alongside Amazon Robotics in an industry-leading workplace.
Facebook, Inc. (NASDAQ: FB), of which Parsons’ fund owns 304,342 shares, has gained 51.53% over the past one year. On June 29, the company’s CEO Mark Zuckerberg announced that Facebook, Inc. (NASDAQ: FB) launched its newsletter “Bulletin,” a freestanding platform for free and paid articles and webcast that will aim to challenge Substack.
But in this article, our focus would be on the socks in Parsons’ Q1 portfolio that pay dividends. One of the dividend stocks in Parsons’ Q1 portfolio is Procter & Gamble Co (NYSE: PG), which has increased its dividend consistently for several and currently has a yield of 2.5%.
Diversifying your portfolio and investing in strong dividend stocks is extremely important, especially during turbulent times like these when even the smart money is struggling. The hedge fund industry’s reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26, 2021, our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16. That’s why we believe hedge fund sentiment is a handy indicator that investors should consider. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Karolina Grabowska from Pexels
With this context and industry outlook in mind, let’s start the list of the 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. We used Junto’s Q1 holdings data for this analysis.
Best Dividend Stocks to Buy According to James Parsons’ Junto Capital Management
10. Warner Music Group Corp. (NASDAQ: WMG)
Parsons’ Stake Value: $30,651,000
Percentage of James Parsons’ 13F Portfolio: 1.1%
Dividend Yield: 1.33%
Number of Hedge Fund Holders: 27
Warner Music Group Corp. (NASDAQ: WMG) is a multinational music entertainment company. It was founded in 1929 and ranks tenth on the list of 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. Warner Music Group Corp. (NASDAQ: WMG) shares have gained about 23.78% over the last 12 months.
Just like Procter & Gamble Co (NYSE: PG), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB), Warner Music Group Corp. (NASDAQ: WMG) is one of the best stocks to buy according to James Parsons. On May 13, Warner declared a quarterly dividend of $0.12 per share, in line with the previous. On May 4, Warner Music Group Corp. (NASDAQ: WMG) announced earnings per share for the second quarter of 2021. It reported earnings per share of $0.23, beating market predictions by $0.07. The revenue for the second quarter of 2021 was $1.25 billion, up 16.8% YoY, beating the estimates by $70 million.
The stock is a new arrival on James Parsons’ portfolio, as his hedge fund bought about 892,841 shares of the company, worth $30.65 million, representing 1.1% of their investment portfolio. Out of the hedge funds being tracked by Insider Monkey, OZ Management is a leading shareholder in Warner Music Group Corp. (NASDAQ: WMG), with 4.30 million shares worth more than $147.45 million.
Cooper Investors, in its fourth-quarter 2020 investor letter, mentioned Warner Music Group Corp. Here is what the fund said in its letter:
“The portfolio also established a position in Warner Music Group (“WMG”), a leading record label and music publisher. The portfolio has a long history of investing in content assets across the spectrum of video, gaming, and audio. Each of these content sub-segments has its own nuances and is at a different stage regarding the impact of technology on distribution and business models; video is still working through the technological impact of streaming, whereas gaming is enhanced by technology, enabling the creation of more immersive content.
Audio, specifically the music industry, has transitioned through the most acute period of technological disruption, with the unbundling of physical albums by pirated and legal services occurring in the early 2000s. With the rise of streaming services like Spotify and Apple Music, we now see the emergence of durable industry tailwinds. Penetration of streaming music is a compelling customer proposition, and these services remain at under 10% penetration of global smartphone users today.
WMG is one of just three major suppliers of scarce IP to the rapidly growing streaming music market. Every time one of their tracks is played on a streaming platform, they get paid. The relationship between the record labels and the streaming platforms remains symbiotic, with both parties needing each other. We do not believe this will evolve much over the foreseeable future. Beyond streaming, there are many other avenues for growth enabled by digital distribution facilitating the collection of royalty revenue, for examples Social Media (TikTok dances), Fitness (Peleton workouts), and Original Content (soundtracks in movies or games).
Management outlined a robust margin expansion plan, including natural efficiencies from digital streaming taking share from physical and specific productivity measures. Combined with the growth tailwinds outlined above, looking out, we see a business with ~US$1bn of Free Cash Flow power annually or roughly triple the amount generated in FY20. This provides the base for a double-digit annual return to shareholders.”
9. Morgan Stanley (NYSE: MS)
Parsons’ Stake Value: $80,376,000
Percentage of James Parsons’ 13F Portfolio: 2.89%
Dividend Yield: 1.53%
Number of Hedge Fund Holders: 79
Morgan Stanley (NYSE: MS) is a holding company, which provides various financial products and services to companies, governments, investment firms, and individuals. It was founded in 1924, and the company stands ninth on the list of 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. Morgan Stanley (NYSE: MS) has returned 92.57% to investors during the course of the past 12 months.
On June 28, Morgan Stanley (NYSE: MS) announced that it doubled its quarterly dividend to 70 cents per share from 35 cents. The company also reported a new share repurchase authorization of up to $12 billion through June 30, 2022. Morgan Stanley (NYSE: MS) has gathered notable surplus capital over the past years and now has one of the biggest capital buffers in the industry. On June 9, Jefferies analyst Daniel Fannon initiated coverage on Morgan Stanley with a “Buy” rating and a price target of $108.
The hedge fund run by James Parsons owns 1.03 million shares in the company worth $80.38 million, representing 2.89% of their investment portfolio. In the first quarter of 2021, 79 hedge funds in the database of Insider Monkey held stakes worth $5.29 billion in Morgan Stanley (NYSE: MS), up from 66 the preceding quarter worth $5.67 billion.
Artisan Partners Limited Partnership, in its fourth quarter 2020 investor letter, mentioned Morgan Stanley (NYSE: MS). Here is what the fund said:
“Top three contributor Morgan Stanley, a leading global financial services company, came into the portfolio in Q4 as a result of its purchase of E*TRADE. E*TRADE is a great fit on Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked Morgan Stanley’s business by adding less volatile fee streams and deemphasizing the risk-obtuse culture of prior management. We believe the market will come to appreciate this mix shift over time.”
8. Walmart Inc. (NYSE: WMT)
Parsons’ Stake Value: $56,908,000
Percentage of James Parsons’ 13F Portfolio: 2.04%
Dividend Yield: 1.56%
Number of Hedge Fund Holders: 58
Walmart Inc. (NYSE: WMT) runs retail, wholesale, and other units globally. The company was founded in 1945, and it ranks eighth on the list of 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. Walmart Inc. (NYSE: WMT) has returned 17.53% to investors in the last 12 months.
Recently company made a remarkable healthcare move with a new insulin product. Walmart (NYSE: WMT) started its original private brand analog insulin, which is cost-effective without compromising quality. On June 24, the stock was rated as “Buy” at Citi because it thinks that Walmart Inc. (NYSE: WMT) is coming out from the pandemic more powerful than ever.
The hedge fund run by James Parsons owns 418,963 shares in Walmart Inc. (NYSE: WMT) worth $56.91 million, representing 2.04% of their investment portfolio. Junto Capital Management has increased its stake in Walmart (NYSE: WMT) stock by 25% in the past few months.
7. Comcast Corporation (NASDAQ: CMCSA)
Parsons’ Stake Value: $24,199,000
Percentage of James Parsons’ 13F Portfolio: 0.87%
Dividend Yield: 1.75%
Number of Hedge Fund Holders: 88
Comcast Corporation (NASDAQ: CMCSA) functions as a broadcasting and technology company globally. The company was founded in 1963 and is placed seventh on the list of 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. Comcast Corporation (NASDAQ: CMCSA) has gained about 48.84% in value over the last 12 months.
Just like Procter & Gamble Co (NYSE: PG), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB), Comcast Corporation (NASDAQ: CMCSA) is one of the best stocks to buy according to James Parsons. On June 30, Comcast Corporation bagged a $102 million tender to deliver Ethernet services to the Defense Information Systems Agency.
On June 25, Steve Malcolm, an analyst at Redburn, initiated coverage on Comcast Corporation (NASDAQ: CMCSA). He rated the stock as “Buy” and set the price target at $70. Comcast has also paid consistent dividends since 1988, making it a good option for dividend investors. On May 25, the company declared a quarterly dividend of $0.25 per share, in line with the previous.
Junto Capital Management holds 447,214 shares in the firm worth over $24 million. In the first quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $9.76 billion in Comcast Corporation (NASDAQ: CMCSA), up from 84 the preceding quarter worth $8.83 billion.
Nelson Capital Management, in its first quarter 2021 investor letter, mentioned Comcast Corporation (NASDAQ: CMCSA). Here is what the fund said:
“Comcast is the Largest cable provider in the U.S. and is the dominant internet access provider in the markets it serves. Though Comcast will likely see further declines in cable subscriptions due to ongoing cord-cutting, it should be able to off set that lost revenue by growing internet access customers and instituting higher pricing. The pandemic has increased the importance of a fast internet connection, with more content streaming to homes at increasingly higher quality. Comcast made significant upgrades early on, allowing it to quickly deploy new technology and increase speeds to meet the evolving needs of its customers.”
6. BlackRock, Inc. (NYSE: BLK)
Parsons’ Stake Value: $122,693,000
Percentage of James Parsons’ 13F Portfolio: 4.41%
Dividend Yield: 1.89%
Number of Hedge Fund Holders: 42
BlackRock, Inc. (NYSE: BLK) is a publicly owned finance managing company. The company was incorporated in 1988 and is ranked sixth on the list of 10 best dividend stocks to buy according to James Parsons’ Junto Capital Management. BlackRock, Inc. (NYSE: BLK) has offered investors returns of 61.68% over the course of the past 12 months.
On June 11, BlackRock (NYSE: BLK) announced that it got permission from Chinese regulators to manage an onshore mutual fund business in China. BlackRock, Inc. (NYSE: BLK) will be the first international asset manager to run a fully owned onshore mutual fund business in the world’s second-biggest economy. BlackRock, Inc. (NYSE: BLK) is a high-quality stock with strong historical dividend growth as the company has been paying a dividend since 2003. On May 26, BlackRock, Inc. (NYSE: BLK) declared a quarterly dividend of $4.13, in line with the previous.
Just like Procter & Gamble Co (NYSE: PG), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB), BlackRock (NYSE: BLK) is one of the best stocks in James Parsons’ Q1 portfolio.
The hedge fund run by James Parsons owns 162,731 shares in the company worth $122.69 million, representing 4.41% of their investment portfolio. Citadel Investment Group is the biggest stakeholder in the company, with 354,933 shares worth $267.61 million.
Baron Funds, in their first-quarter 2021 investor letter, mentioned BlackRock, Inc. (NYSE: BLK). Here is what the fund said:
“During the quarter, we initiated a position in BlackRock Inc., the world’s largest investment manager with $9 trillion in assets under management. BlackRock offers an array of products across equities, fixed income, alternatives, and cash management to institutional and retail investors worldwide. About one-quarter of BlackRock’s assets under management is actively managed, and the rest is in passive index funds and iShares-branded ETFs. The company offers technology services including the investment and risk management platform, Aladdin, as well as other advisory services and solutions. Over the five years ending December 31, 2020, assets under management and earnings per share grew at compound annual growth rates of 13% and 12%, respectively.
We believe BlackRock is well positioned for continued growth given its diverse product offering, global distribution, brand recognition, and capable management team. With most of its assets in index funds and ETFs, BlackRock is a prime beneficiary of the ongoing shift to passive investing. The company also benefits from increasing demand for sustainable investment strategies and “barbell” strategies that use a combination of low-cost index funds, active and illiquid alternatives products. BlackRock fits squarely within our Tech-Enabled Financials theme given its longstanding commitment to innovation and proprietary technology platform, Aladdin, which serves as the investment and risk management system for both BlackRock and a growing number of institutional investors around the world. We expect BlackRock’s earnings per share will continue to grow at a double-digit annual rate over a market cycle through a combination of mid-single-digit growth in assets under management from net inflows, market appreciation, low to mid-teens revenue growth in technology services, modest margin expansion, and share repurchases.”
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Disclosure: None. 10 Best Dividend Stocks to Buy According to James Parsons’ Junto Capital Management is originally published on Insider Monkey.
